Ohio House passes legislation that will give a big tax cut to most Ohio banks

A tax code revision that will cut levies for most Ohio banks cleared one of its final hurdles on Tuesday.

The Ohio House of Representatives concurred on the revised Senate version of a bill that the House had passed earlier this year. It approved the bill by a 76 to 16 vote, the Ohio Bankers League said.

The group has been a key backer of the legislation, which will change state tax code to tax financial institutions based on equity capital in Ohio instead of net worth. That change means most Ohio banks, particularly smaller community banks, are looking at a 39 percent tax cut when the legislation takes effect in the 2014 tax year.

Changing the tax code has been called “revenue neutral” — it won’t cost the state any money or bring in additional revenue — because the tax cuts for smaller banks will be paid for by an expected influx of $30 million from banks that have been skirting Ohio law. Under current law, banks can lessen their tax burden in Ohio by moving money to out-of-state affiliates.

Banks will pay the new tax based on equity capital in three different brackets, with the rate shrinking as the level of capital increases.

Some smaller banks have said they could use the tax break to originate more loans or to help pay for audit and compliance.